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Pennsylvania government fails to learn that more taxes isn’t the answer: Nathan Benefield

Posted
Wednesday, July 26, 2017 12:25 pm

Nathan Benefield

Thanks to last year’s state budget, you’re paying more to watch “House of Cards.” This year, “The Walking Dead” — and a host of other cable TV shows — could cost you more, too.

Just one year ago, lawmakers passed an unpaid-for state spending plan, which Gov. Tom Wolf let become law. To fill the gap, they all agreed to a $650 million tax increase that hiked prices on Netflix, cigarettes, and vaping products.

In a case of disturbing déjà vu, Wolf let yet another unfunded spending plan become law recently. This time, lawmakers are eyeing a tax on basic cable — along with a tax on home heating bills, a tax on bar drinks, and another tax on gas drillers —to fill the gap.

In the last eight years, lawmakers have raised taxes four times to the tune of $4 billion — including a $727 million increase in 2009; a $250 million natural gas impact tax in 2012; an increase in the gasoline tax and motorist fees and fines in 2013, amounting to $2.3 billion when fully implemented; and a $650 million tax package last year that included the Netflix tax as well as the infamous vape tax that forced nearly 100 vape shop owners out of business.

We can’t keep repeating the same failed mistakes of past.

The real solution is shrouded in shadows — or in the shadow budget, to be exact. The latest $32 billion spending plan represents just 40 percent of total state spending. An astounding 60 percent of state government’s costs are “off book” in a largely unknown and rarely scrutinized shadow budget.

This budget includes more than 150 “special funds” that are often on autopilot, increasing each year without review. Funds like the Keystone Recreation, Park and Conservation Fund, the Agricultural Conservation Easement Purchase Fund, and the Race Horse Development Fund, which alone costs $250 million.

Yet, instead of prioritizing shadow budget spending, some argue Pennsylvanians deserve another tax hike. This despite the fact that Pennsylvanians already bear the 15th-highest state and local tax burden in the nation, at $4,589 per person or more than $18,000 per family of four.

Our state’s tax burden has already driven thousands to seek better opportunity elsewhere. From July 2015 to July 2016, Pennsylvania’s total population fell for the first time in 31 years, dropping by more than 7,600. Meanwhile, many states experiencing population growth — such as Texas, Florida, North Carolina, Nevada, and Idaho — have lower tax burdens.

A new tax on basic cable would hardly make our state more attractive to families.

The drumbeat is also intensifying for a natural gas severance tax, purportedly to make drilling corporations pay their “fair share.” Yet the existing tax on gas drillers — called an impact fee — is equal to a 6.9 percent severance tax, according to the Independent Fiscal Office. That is higher than the lifetime effective tax rate in any other state.

Drillers shoulder this tax on top of taxes paid by every other business in the state. If we truly wanted to “be like other gas producing states” we would use a severance tax to eliminate our state income tax or our corporate tax.

What’s more, the true cost of a severance tax would be borne not by corporations but by Pennsylvanians who experience lower wages, fewer job opportunities, and even layoffs — further contributing to our state’s population decline.

Lawmakers must recognize that taxing “The Walking Dead” isn’t the answer. Instead, redirecting shadow-budget spending, implementing transformative human services reforms, and getting government out of the booze business would deliver both short- and long-term, non-tax budget solutions.

Pennsylvanians don’t deserve the bill for Harrisburg’s reckless spending. They deserve a government that protects — not plunders — their family budgets.

Nathan Benefield is vice president and COO of the Commonwealth Foundation, Pennsylvania’s free-market think tank.